SPECIAL COMMUNICATION Cigarette smuggling in Europe: who really benefits?

Cigarette smuggling, now on the increase, is so widespread and well organised that it poses a serious threat to public health. This threat comes from two principal directions. First, smuggling makes cigarettes available cheaply, thereby increasing consumption. A third of annual global exports go to the contraband market, representing an enormous impact on consumption, and thus causing an increase in the burden of disease, especially in poorer countries. It is also costing government treasuries thousands of millions of dollars in lost tax revenue. Second, the tobacco industry uses smuggling politically, lobbying governments to lower tax, arguing that smuggling is caused by price diVerences. This paper shows that the claimed correlation between high prices and high levels of smuggling does not exist in western Europe. In fact, countries such as Norway and Sweden, with expensive cigarettes, do not have a large smuggling problem,whereas countries in the south of Europe do. Cigarette smuggling is not caused principally by “market forces”. It is mainly caused by fraud, by the illegal evasion of import duty. The cigarettes involved are not the cheap brands from southern European countries, for which there is no international market. It is the well-known international brands such as Marlboro and Winston. We propose much tighter regulation of cigarette trade, including an international transport convention, and a total ban on transit trade—sale by the manufacturers to dealers, who sell on to smugglers. (Tobacco Control 1998;7:66–71) “Although sales of contraband cigarettes have aVected the level of income the governments world-wide derive from tobacco sales, smuggling has also helped to promote some of the world’s leading brands in markets which had remained closed to foreign imports and where demand for Western cigarettes has continued to grow.” Cigarette smuggling is now so widespread and well organised that it poses a serious threat to public health, and to government treasuries, which it is costing thousands of millions of dollars in lost tax revenue. Furthermore it is on the increase. The threat to public health comes from two principal directions. First, smuggling makes cigarettes available cheaply, thereby increasing consumption. Because, as we show, a third of annual global exports go to the contraband market, this eVect is enormous. It causes a massive increase in the burden of disease, especially in poorer countries. Second, the tobacco industry uses smuggling politically to argue against high tobacco taxes. They did so successfully in Canada with a resulting increase in consumption and loss of revenue. Smuggling is also important because it tells us a lot about the true nature of the tobacco industry. We examine some industry arguments about the causes and nature of smuggling and find them to be less than convincing. Indeed, the evidence suggests that the tobacco manufacturers are the chief beneficiaries of smuggling, and as the above quotation from a tobacco trade report shows, they benefit from the way smuggling acts as a market entry strategy. How big is the problem? Almost a third of global cigarette exports is funnelled into the illegal contraband market. This figure is estimated by looking at the diVerence between global exports and imports, almost all of the “missing” cigarettes being